Volkswagen warns of ‘harmful’ consequences from Trump’s Mexico tariffs

Volkswagen has cautioned that the US administration’s proposed tariffs on imports from Mexico could have a “harmful economic impact” on both American consumers and the global automotive industry.

It comes after President Donald Trump indicated this week that he intends to impose tariffs as high as 25 per cent on vehicles from Mexico and Canada by 1 February, citing concerns over migration.

Volkswagen operates a large plant in Puebla, Mexico — its biggest site outside Europe — which built nearly 350,000 vehicles in 2023, primarily for export to the United States. The German carmaker criticised the mooted protectionist move, saying:

“The Volkswagen Group is concerned about the harmful economic impact that proposed tariffs by the US administration will have on American consumers and the international automotive industry. We remain a strong advocate for free and fair trade.”

The company has invested more than $10 billion in the US market, maintaining that “open markets have been a driving force behind global economic growth and prosperity”. Analysts at Stifel previously warned that around 65 per cent of Volkswagen’s US sales are made up of cars produced in Mexico, suggesting that if new tariffs are enforced, the brand could become uncompetitive and even withdraw from the American market altogether.

Volkswagen shares eased by €0.50, or 0.5 per cent, to €96.35, while its rival Stellantis slipped €0.17, or 1.3 per cent, to €12.68. Stellantis, which imports nearly 40 per cent of its US-sold vehicles from Mexico and Canada, has expressed support for boosting US-based manufacturing. The group’s chairman, John Elkann, reportedly spent four days meeting Trump and senior officials in the new administration earlier this month.

The potential introduction of tariffs threatens to disrupt the US-Mexico-Canada trade agreement (USMCA), the successor to the North American Free Trade Agreement (Nafta). Both Canada and Mexico have vowed to retaliate with counter-tariffs if Trump goes ahead with his plan, creating the prospect of a new trade war. The Canadian dollar and Mexican peso each weakened against the US dollar by mid-morning on the news, falling 0.9 per cent and 1.2 per cent respectively.

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Volkswagen warns of ‘harmful’ consequences from Trump’s Mexico tariffs